G.R. No.

165849 07/12/2017, 11(00 PM

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Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 165849 December 10, 2007

GILBERT G. GUY, Petitioner,

vs.
THE COURT OF APPEALS (8th DIVISION), NORTHERN ISLANDS CO., INCORPORATED, SIMNY G. GUY,
GERALDINE G. GUY, GLADYS G. YAO, and EMILIA TABUGADIR, Respondents.

x - - - - - - - - - - - - - - - - - - - - - - -x

G.R. No. 170185

IGNACIO AND IGNACIO LAW OFFICES, Petitioner,

vs.
THE COURT OF APPEALS (7th DIVISION), NORTHERN ISLANDS CO., INCORPORATED, SIMNY G. GUY,
GERALDINE G. GUY, GLADYS G. YAO, and EMILIA A. TABUGADIR, Respondents.

x - - - - - - - - - - - - - - - - - - - - - - -x

G.R. No. 170186

SMARTNET PHILIPPINES, Petitioner,

vs.
THE COURT OF APPEALS (7th DIVISION), NORTHERN ISLANDS CO., INCORPORATED, SIMNY G. GUY,
GERALDINE G. GUY, GLADYS G. YAO, and EMILIA A. TABUGADIR, Respondents.

x - - - - - - - - - - - - - - - - - - - - - - -x

G.R. No. 171066

LINCOLN CONTINENTAL DEVELOPMENT CO., INC., Petitioner,

vs.
NORTHERN ISLANDS CO., INCORPORATED, SIMNY G. GUY, GERALDINE G. GUY, GRACE G. CHEU,
GLADYS G. YAO, and EMILIA A. TABUGADIR, Respondents.

x - - - - - - - - - - - - - - - - - - - - - - -x

G.R. No. 176650

LINCOLN CONTINENTAL DEVELOPMENT COMPANY, INC., Petitioner,

vs.
NORTHERN ISLANDS CO., INCORPORATED, SIMNY G. GUY, GERALDINE G. GUY, GRACE G. CHEU,
GLADYS G. YAO, and EMILIA A. TABUGADIR, Respondents.

DECISION

SANDOVAL-GUTIERREZ, J.:

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Before us are five (5) consolidated cases which stemmed from Civil Case No. 04-109444 filed with the Regional
Trial Court (RTC), Branch 24, Manila, subsequently re-raffled to Branch 461 and eventually to Branch 25.2

The instant controversies arose from a family dispute. Gilbert Guy is the son of Francisco and Simny Guy.
Geraldine, Gladys and Grace are his sisters. The family feud involves the ownership and control of 20,160 shares of
stock of Northern Islands Co., Inc. (Northern Islands) engaged in the manufacture, distribution, and sales of various
home appliances bearing the "3-D" trademark.

Simny and her daughters Geraldine, Gladys and Grace, as well as Northern Islands and Emilia Tabugadir, have
been impleaded as respondents in the above-entitled cases. Northern Islands is a family-owned corporation
organized in 1957 by spouses Francisco and respondent Simny Guy. In November 1986, they incorporated Lincoln
Continental Development Corporation, Inc. (Lincoln Continental) as a holding company of the 50% shares of stock
of Northern Islands in trust for their three (3) daughters, respondents Geraldine, Gladys and Grace. Sometime in
December 1986, upon instruction of spouses Guy, Atty. Andres Gatmaitan, president of Lincoln Continental,
indorsed in blank Stock Certificate No. 132 (covering 8,400 shares) and Stock Certificate No. 133 (covering 11,760
shares) and delivered them to Simny.

In 1984, spouses Guy found that their son Gilbert has been disposing of the assets of their corporations without
authority. In order to protect the assets of Northern Islands, Simny surrendered Stock Certificate Nos. 132 and 133
to Emilia Tabugadir, an officer of Northern Islands. The 20,160 shares covered by the two Stock Certificates were
then registered in the names of respondent sisters, thus enabling them to assume an active role in the management
of Northern Islands.

On January 27, 2004, during a special meeting of the stockholders of Northern Islands, Simny was elected
President; Grace as Vice-President for Finance; Geraldine as Corporate Treasurer; and Gladys as Corporate
Secretary. Gilbert retained his position as Executive Vice President. This development started the warfare between
Gilbert and his sisters.

On March 18, 2004, Lincoln Continental filed with the RTC, Branch 24, Manila a Complaint for Annulment of the
Transfer of Shares of Stock against respondents, docketed as Civil Case No. 04-109444. The complaint basically
alleges that Lincoln Continental owns 20,160 shares of stock of Northern Islands; and that respondents, in order to
oust Gilbert from the management of Northern Islands, falsely transferred the said shares of stock in respondent
sisters’ names. Lincoln Continental then prayed for an award of damages and that the management of Northern
Islands be restored to Gilbert. Lincoln also prayed for the issuance of a temporary restraining order (TRO) and a writ
of preliminary mandatory injunction to prohibit respondents from exercising any right of ownership over the shares.

On June 16, 2004, Lincoln Continental filed a Motion to Inhibit the Presiding Judge of Branch 24, RTC, Manila on
the ground of partiality. In an Order dated June 22, 2004, the presiding judge granted the motion and inhibited
himself from further hearing Civil Case No. 04-109444. It was then re-raffled to Branch 46 of the same court.

On July 12, 2004, Branch 46 set the continuation of the hearing on Lincoln Continental’s application for a TRO.

On July 13, 2004, respondents filed with the Court of Appeals a Petition for Certiorari and Mandamus, docketed as
CA-G.R. SP No. 85069, raffled off to the Tenth Division. Respondents alleged that the presiding judge of Branch 24,
in issuing the Order dated June 22, 2004 inhibiting himself from further hearing Civil Case No. 04-109444, and the
presiding judge of Branch 46, in issuing the Order dated July 12, 2004 setting the continuation of hearing on Lincoln
Continental’s application for a TRO, acted with grave abuse of discretion tantamount to lack or excess of jurisdiction.

Meanwhile, on July 15, 2004, the trial court issued the TRO prayed for by Lincoln Continental directing respondents
to restore to Gilbert the shares of stock under controversy. In the same Order, the trial court set the hearing of
Lincoln Continental’s application for a writ of preliminary injunction on July 19, 20, and 22, 2004.

On July 16, 2004, the Court of Appeals (Tenth Division) issued a TRO enjoining Branch 46, RTC, Manila from
enforcing, maintaining, or giving effect to its Order of July 12, 2004 setting the hearing of Lincoln Continental’s
application for a TRO.

Despite the TRO, the trial court proceeded to hear Lincoln Continental’s application for a writ of preliminary
injunction. This prompted respondents to file in the same CA-G.R. SP No. 85069 a Supplemental Petition for
Certiorari, Prohibition, and Mandamus seeking to set aside the Orders of the trial court setting the hearing and
actually hearing Lincoln Continental’s application for a writ of preliminary injunction. They prayed for a TRO and a

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writ of preliminary injunction to enjoin the trial court (Branch 46) from further hearing Civil Case No. 04-109444.

On September 17, 2004, the TRO issued by the Court of Appeals (Tenth Division) in CA-G.R. SP No. 85069
expired.

On September 20, 2004, Gilbert filed a Motion for Leave to Intervene and Motion to Admit Complaint-in-Intervention
in Civil Case No. 04-109444. In its Order dated October 4, 2004, the trial court granted the motions.

Meantime, on October 13, 2004, the trial court issued the writ of preliminary mandatory injunction prayed for by
Lincoln Continental in Civil Case No. 04-109444.

On October 20, 2004, the Court of Appeals (Tenth Division) denied respondents’ application for injunctive relief
since the trial court had already issued a writ of preliminary injunction in favor of Lincoln Continental. Consequently,
on October 22, 2004, respondents filed with the Tenth Division a Motion to Withdraw Petition and Supplemental
Petition in CA-G.R. SP No. 85069.

On October 26, 2004, respondents filed a new Petition for Certiorari with the Court of Appeals, docketed as CA-G.R.
SP No. 87104, raffled off to the Eighth Division. They prayed that the TRO and writ of preliminary injunction issued
by the RTC, Branch 46, Manila be nullified and that an injunctive relief be issued restoring to them the management
of Northern Islands. They alleged that Gilbert has been dissipating the assets of the corporation for his personal
gain.

On October 28, 2004, the Court of Appeals Eighth Division issued a TRO enjoining the implementation of the writ of
preliminary injunction dated October 13, 2004 issued by the trial court in Civil Case No. 04-109444; and directing
Lincoln Continental to turn over the assets and records of Northern Islands to respondents.

On November 2, 2004, respondents filed with the appellate court (Eighth Division) an Urgent Omnibus Motion
praying for the issuance of a break-open Order to implement its TRO.

On November 4, 2004, the Eighth Division issued a Resolution granting respondents’ motion. Pursuant to this
Resolution, respondents entered the Northern Islands premises at No. 3 Mercury Avenue, Libis, Quezon City.

On November 18, 2004, Gilbert filed with this Court a petition for certiorari, docketed as G.R. No. 165849, alleging
that the Court of Appeals (Eighth Division), in granting an injunctive relief in favor of respondents, committed grave
abuse of discretion tantamount to lack or in excess of jurisdiction. The petition also alleges that respondents
resorted to forum shopping.

Meanwhile, on December 16, 2004, Smartnet Philippines, Inc. (Smartnet) filed with the Metropolitan Trial Court
(MeTC), Branch 35, Quezon City a complaint for forcible entry against respondents, docketed as Civil Case No. 35-
33937. The complaint alleges that in entering the Northern Islands premises, respondents took possession of the
area being occupied by Smartnet and barred its officers and employees from occupying the same.

Likewise on December 16, 2004, Ignacio and Ignacio Law Offices also filed with Branch 37, same court, a complaint
for forcible entry against respondents, docketed as Civil Case No. 34106. It alleges that respondents forcibly
occupied its office space when they took over the premises of Northern Islands.

On December 22, 2004, the Eighth Division issued the writ of preliminary injunction prayed for by respondents in
CA-G.R. SP No. 87104.

Subsequently, the presiding judge of the RTC, Branch 46, Manila retired. Civil Case No. 04-109444 was then re-
raffled to Branch 25.

On January 20, 2005, respondents filed with the Eighth Division of the appellate court a Supplemental Petition for
Certiorari with Urgent Motion for a Writ of Preliminary Injunction to Include Supervening Events. Named as
additional respondents were 3-D Industries, Judge Celso D. Laviña, Presiding Judge, RTC, Branch 71, Pasig City
and Sheriff Cresencio Rabello, Jr. This supplemental petition alleges that Gilbert, in an attempt to circumvent the
injunctive writ issued by the Eighth Division of the appellate court, filed with the RTC, Branch 71, Pasig City a
complaint for replevin on behalf of 3-D Industries, to enable it to take possession of the assets and records of
Northern Islands. The complaint was docketed as Civil Case No. 70220. On January 18, 2005, the RTC issued the
writ of replevin in favor of 3-D Industries.

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On April 15, 2005, respondents filed with the Eighth Division a Second Supplemental Petition for Certiorari and
Prohibition with Urgent Motion for the Issuance of an Expanded Writ of Preliminary Injunction. Impleaded therein as
additional respondents were Ignacio and Ignacio Law Offices, Smartnet, Judge Maria Theresa De Guzman,
Presiding Judge, MeTC, Branch 35, Quezon City, Judge Augustus C. Diaz, Presiding Judge, MeTC, Branch 37,
Quezon City, Sun Fire Trading Incorporated, Zolt Corporation, Cellprime Distribution Corporation, Goodgold Realty
and Development Corporation, John Does and John Doe Corporations. Respondents alleged in the main that the
new corporations impleaded are alter egos of Gilbert; and that the filing of the forcible entry cases with the MeTC
was intended to thwart the execution of the writ of preliminary injunction dated December 22, 2004 issued by the
Court of Appeals (Eighth Division) in CA-G.R. SP No. 87104. 1awphil

On April 26, 2005, the Eighth Division issued a Resolution admitting respondents’ new pleading. On August 19,
2005, the Eighth Division (now Seventh Division) rendered its Decision in CA-G.R. SP No. 87104, the dispositive
portion of which reads:

WHEREFORE, premises considered, the petition is hereby GRANTED and the October 13, 2004 Order and the
October 13, 2004 Writ of Preliminary Mandatory Injunction issued by Branch 46 of the Regional Trial Court of Manila
are hereby REVERSED and SET ASIDE. The December 17, 2004 Order and Writ of Preliminary Injunction issued
by this Court of Appeals are hereby MADE PERMANENT against all respondents herein.

SO ORDERED.

Meanwhile, in a Decision3 dated September 19, 2005, the RTC, Branch 25, Manila dismissed the complaint filed by
Lincoln Continental and the complaint-in-intervention of Gilbert in Civil Case No. 04-109444, thus:

WHEREFORE, in view of the foregoing, the Complaint and the Complaint-in-Intervention are hereby DISMISSED.
Plaintiff and plaintiff-intervenor are hereby ordered to jointly and severally pay defendants the following:

(a) Moral damages in the amount of Php2,000,000.00 each for defendants Simny Guy, Geraldine Guy, Grace
Guy-Cheu and Gladys Yao;

(b) Moral damages in the amount of Php200,000.00 for defendant Emilia Tabugadir;

(c) Exemplary damages in the amount of Php2,000,000.00 each for defendants Simny Guy, Geraldine Guy,
Grace Guy-Cheu, and Gladys Yao;

(d) Exemplary damages in the amount of Php200,000.00 for defendant Emilia Tabugadir;

(e) Attorney’s fees in the amount of Php2,000.000.00; and

(f) Costs of suit.

SO ORDERED.

The trial court held that Civil Case No. 04-109444 is a baseless and an unwarranted suit among family members;
that based on the evidence, Gilbert was only entrusted to hold the disputed shares of stock in his name for the
benefit of the other family members; and that it was only when Gilbert started to dispose of the assets of the family’s
corporations without their knowledge that respondent sisters caused the registration of the shares in their respective
names.

Both Lincoln Continental and Gilbert timely appealed the RTC Decision to the Court of Appeals, docketed therein as
CA-G.R. CV No. 85937.

On September 15, 2005, 3-D Industries, Inc. filed a petition for certiorari, prohibition, and mandamus with this Court
assailing the Decision of the Court of Appeals in CA-G.R. SP No. 87104 setting aside the writ of preliminary
injunction issued by the RTC, Branch 46. The petition was docketed as G.R. No. 169462 and raffled off to the Third
Division of this Court.

On October 3, 2005, the Third Division of this Court issued a Resolution4 dismissing the petition of 3-D Industries in
G.R. No. 169462. 3-D Industries timely filed its motion for reconsideration but this was denied by this Court in its
Resolution5 dated December 14, 2005.

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Meanwhile, on October 10, 2005, Gilbert, petitioner in G.R. No. 165849 for certiorari, filed with this Court a
Supplemental Petition for Certiorari, Prohibition, and Mandamus with Urgent Application for a Writ of Preliminary
Mandatory Injunction challenging the Decision of the Court of Appeals (Seventh Division), dated August 19, 2005, in
CA-G.R. SP No. 87104. This Decision set aside the Order dated October 13, 2004 of the RTC, Branch 46 granting
the writ of preliminary injunction in favor of Lincoln Continental.

On November 8, 2005, Ignacio and Ignacio Law Offices and Smartnet filed with this Court their petitions for
certiorari, docketed as G.R. Nos. 170185 and 170186, respectively.

On February 27, 2006, Lincoln Continental filed with this Court a petition for review on certiorari challenging the
Decision of the Court of Appeals (Seventh Division) in CA-G.R. CV No. 85937, docketed as G.R. No. 171066.

On March 20, 2006, we ordered the consolidation of G.R. No. 171066 with G.R. Nos. 165849, 170185, and 170186.

In the meantime, in a Decision dated November 27, 2006 in CA-G.R. CV No. 85937, the Court of Appeals (Special
Second Division) affirmed the Decision in Civil Case No. 04-109444 of the RTC (Branch 25) dismissing Lincoln
Continental’s complaint and Gilbert’s complaint-in-intervention, thus:

WHEREFORE, the appeals are dismissed and the assailed decision AFFIRMED with modifications that plaintiff and
plaintiff-intervenor are ordered to pay each of the defendants-appellees Simny Guy, Geraldine Guy, Grace Guy-
Cheu and Gladys Yao moral damages of ₱500,000.00, exemplary damages of ₱100,000.00 and attorney’s fees of
₱500,000.00.

SO ORDERED.

Lincoln Continental and Gilbert filed their respective motions for reconsideration, but they were denied in a
Resolution promulgated on February 12, 2007.

Lincoln Continental then filed with this Court a petition for review on certiorari assailing the Decision of the Court of
Appeals (Former Special Second Division) in CA-G.R. CV No. 85937. This petition was docketed as G.R. No.
176650 and raffled off to the Third Division of this Court.

In our Resolution dated June 6, 2007, we ordered G.R. No. 176650 consolidated with G.R. Nos. 165849, 170185,
170186, and 171066.

THE ISSUES

In G.R. Nos. 165849 and 171066, petitioners Gilbert and Lincoln Continental raise the following issues: (1) whether
respondents are guilty of forum shopping; and (2) whether they are entitled to the injunctive relief granted in CA-
G.R. SP No. 87104.

In G.R. Nos. 170185 and 170186, the pivotal issue is whether the Court of Appeals committed grave abuse of
discretion amounting to lack or excess of jurisdiction in ruling that petitioners Ignacio and Ignacio Law Offices and
Smartnet are also covered by its Resolution granting the writ of preliminary injunction in favor of respondents.

In G.R. No. 176650, the core issue is whether the Court of Appeals (Special Second Division) erred in affirming the
Decision of the RTC, Branch 25, Manila dated September 19, 2005 dismissing the complaint of Lincoln Continental
and the complaint-in-intervention of Gilbert in Civil Case No. 04-109444.

THE COURT’S RULING

A. G.R. Nos. 165849 and 171066

On the question of forum shopping, petitioners Gilbert and Lincoln Continental contend that the acts of respondents
in filing a petition for certiorari and mandamus in CA-G.R. SP No. 85069 and withdrawing the same and their
subsequent filing of a petition for certiorari in CA-G.R. SP No. 87104 constitute forum shopping; that respondents
withdrew their petition in CA-G.R. SP No. 85069 after the Tenth Division issued a Resolution dated October 20,
2004 denying their application for a writ of preliminary injunction; that they then filed an identical petition in CA-G.R.
SP No. 87104 seeking the same relief alleged in their petition in CA-G.R. SP No. 85069; and that by taking
cognizance of the petition in CA-G.R. SP No. 87104, instead of dismissing it outright on the ground of forum
shopping, the Court of Appeals committed grave abuse of discretion tantamount to lack or excess of jurisdiction.

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A party is guilty of forum shopping when he repetitively avails of several judicial remedies in different courts,
simultaneously or successively, all substantially founded on the same transactions and the same essential facts and
circumstances, and all raising substantially the same issues either pending in, or already resolved adversely by
some other court.6 It is prohibited by Section 5, Rule 7 of the 1997 Rules of Civil Procedure, as amended, which
provides:

SECTION 5. Certification against forum shopping. – The plaintiff or principal party shall certify under oath in the
complaint or other initiatory pleading asserting a claim for relief, or in a sworn certification annexed thereto and
simultaneously filed therewith: (a) that he has not theretofore commenced any action or filed any other claim
involving the same issues in any court, tribunal, or quasi-judicial agency and, to the best of his knowledge, no such
other action or claim is pending therein; (b) if there is such other pending action or claim, a complete statement of
the present status thereof; and (c) if he should thereafter learn that the same or similar action has been filed or is
pending, he shall report that fact within five (5) days therefrom to the court wherein his aforesaid complaint or
initiatory pleading has been filed.

Failure to comply with the foregoing requirements shall not be curable by mere amendment of the complaint or other
initiatory pleading but shall be cause for the dismissal of the case without prejudice, unless otherwise provided,
upon motion and hearing. The submission of a false certification or non-compliance with any of the undertakings
therein shall constitute indirect contempt of court, without prejudice to the corresponding administrative and criminal
actions. If the acts of the party or his counsel clearly constitute willful and deliberate forum shopping, the same shall
be ground for summary dismissal with prejudice and shall constitute direct contempt, as well as a cause for
administrative sanctions.

Forum shopping is condemned because it unnecessarily burdens our courts with heavy caseloads, unduly taxes the
manpower and financial resources of the judiciary and trifles with and mocks judicial processes, thereby affecting
the efficient administration of justice.7 The primary evil sought to be proscribed by the prohibition against forum
shopping is, however, the possibility of conflicting decisions being rendered by the different courts and/or
administrative agencies upon the same issues.8

Forum shopping may only exist where the elements of litis pendentia are present or where a final judgment in one
case will amount to res judicata in the other.9 Litis pendentia as a ground for dismissing a civil action is that situation
wherein another action is pending between the same parties for the same cause of action, such that the second
action is unnecessary and vexatious. The elements of litis pendentia are as follows: (a) identity of parties, or at least
such as representing the same interest in both actions; (b) identity of rights asserted and the relief prayed for, the
relief being founded on the same facts; and (c) the identity of the two cases such that judgment in one, regardless of
which party is successful, would amount to res judicata in the other.10 From the foregoing, it is clear that sans litis
pendentia or res judicata, there can be no forum shopping.

While the first element of litis pendentia – identity of parties – is present in both CA-G.R. SP No. 85069 and CA-G.R.
SP No. 87104, however, the second element, does not exist. The petitioners in CA-G.R. SP No. 85069 prayed that
the following Orders be set aside:

(1) the Order of inhibition dated June 22, 2004 issued by the presiding judge of the RTC of Manila, Branch 24;
and

(2) the Order dated July 12, 2004 issued by Branch 46 setting Gilbert’s application for preliminary injunction
for hearing.

In their petition in CA-G.R. SP No. 87104, respondents prayed for the annulment of the writ of preliminary injunction
issued by the RTC, Branch 46 after the expiration of the TRO issued by the Tenth Division of the Court of Appeals.
Evidently, this relief is not identical with the relief sought by respondents in CA-G.R. SP No. 85069. Clearly, the
second element of litis pendentia – the identity of reliefs sought - is lacking in the two petitions filed by respondents
with the appellate court. Thus, we rule that no grave abuse of discretion amounting to lack or excess of jurisdiction
may be attributed to the Court of Appeals (Eighth Division) for giving due course to respondents’ petition in CA-G.R.
SP No. 87104.

On the second issue, Section 3, Rule 58 of the 1997 Rules of Civil Procedure, as amended provides:

SECTION 3. Grounds for issuance of preliminary injunction. – A preliminary injunction may be granted when it is

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established:

(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in
restraining the commission or continuance of the act or acts complained of, or in requiring the performance of
an act or acts, either for a limited period or perpetually;

(b) That the commission, continuance, or non-performance of the act or acts complained of during the
litigation would probably work injustice to the applicant; or

(c) That a party, court, agency, or a person is doing, threatening, or is attempting to do, or is procuring or
suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the subject
of the action or proceeding, and tending to render the judgment ineffectual.

For a party to be entitled to an injunctive writ, he must show that there exists a right to be protected and that the acts
against which the injunction is directed are violative of this right.11 In granting the respondents’ application for
injunctive relief and making the injunction permanent, the Court of Appeals (Seventh Division) found that they have
shown their clear and established right to the disputed 20,160 shares of stock because: (1) they have physical
possession of the two stock certificates equivalent to the said number of shares; (2) Lincoln Continental is a mere
trustee of the Guy family; and (3) respondents constitute a majority of the board of directors of Northern Islands, and
accordingly have management and control of the company at the inception of Civil Case No. 94-109444. The
appellate court then ruled that the trial court committed grave abuse of discretion in issuing a writ of preliminary
mandatory injunction in favor of Guy. The writ actually reduced the membership of Northern Islands board to just
one member - Gilbert Guy. Moreover, he failed to establish by clear and convincing evidence his ownership of the
shares of stock in question. The Court of Appeals then held there was an urgent necessity to issue an injunctive writ
in order to prevent serious damage to the rights of respondents and Northern Islands.

We thus find no reason to depart from the findings of the Court of Appeals. Indeed, we cannot discern any taint of
grave abuse of discretion on its part in issuing the assailed writ of preliminary injunction and making the injunction
permanent.

B. G.R. Nos. 170185 & 170186

Ignacio and Ignacio Law Offices and Smartnet, petitioners, claim that the Court of Appeals never acquired
jurisdiction over their respective persons as they were not served with summons, either by the MeTC or by the
appellate court in CA-G.R. SP No. 87104. Thus, they submit that the Court of Appeals committed grave abuse of
discretion amounting to lack or excess of jurisdiction when it included them in the coverage of its injunctive writ.

Jurisdiction is the power or capacity given by the law to a court or tribunal to entertain, hear, and determine certain
controversies.12 Jurisdiction over the subject matter of a case is conferred by law.

Section 9 (1) of Batas Pambansa Blg. 129,13 as amended, provides:

SEC. 9. Jurisdiction. – The Court of Appeals shall exercise:

(1) Original jurisdiction to issue writs of mandamus, prohibition, certiorari, habeas corpus, and quo warranto, and
auxiliary writs or processes, whether or not in aid of its appellate jurisdiction.

Rule 46 of the 1997 Rules of Civil Procedure, as amended, governs all cases originally filed with the Court of
Appeals. The following provisions of the Rule state:

SEC. 2. To what actions applicable. – This Rule shall apply to original actions for certiorari, prohibition, mandamus
and quo warranto.

Except as otherwise provided, the actions for annulment of judgment shall be governed by Rule 47, for certiorari,
prohibition, and mandamus by Rule 65, and for quo warranto by Rule 66.

xxx

SEC. 4. Jurisdiction over person of respondent, how acquired. – The court shall acquire jurisdiction over the person
of the respondent by the service on him of its order or resolution indicating its initial action on the petition or by his

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voluntary submission to such jurisdiction.

SEC. 5. Action by the court. – The court may dismiss the petition outright with specific reasons for such dismissal or
require the respondent to file a comment on the same within ten (10) days from notice. Only pleadings required by
the court shall be allowed. All other pleadings and papers may be filed only with leave of court.

It is thus clear that in cases covered by Rule 46, the Court of Appeals acquires jurisdiction over the persons of the
respondents by the service upon them of its order or resolution indicating its initial action on the petitions or by their
voluntary submission to such jurisdiction.14 The reason for this is that, aside from the fact that no summons or other
coercive process is served on respondents, their response to the petitions will depend on the initial action of the
court thereon. Under Section 5, the court may dismiss the petitions outright, hence, no reaction is expected from
respondents and under the policy adopted by Rule 46, they are not deemed to have been brought within the court’s
jurisdiction until after service on them of the dismissal order or resolution.15

Records show that on April 27, 2005, petitioners in these two forcible entry cases, were served copies of the
Resolution of the Court of Appeals (Seventh Division) dated April 26, 2005 in CA-G.R. SP No. 87104.16 The
Resolution states:

Private respondents SMARTNET PHILIPPINES, INC., IGNACIO & IGNACIO LAW OFFICE, SUNFIRE TRADING,
INC., ZOLT CORPORATION, CELLPRIME DISTRIBUTION CORPO., GOODGOLD REALTY & DEVELOPMENT
CORP., are hereby DIRECTED to file CONSOLIDATED COMMENT on the original Petition for Certiorari, the First
Supplemental Petition for Certiorari, and the Second Supplemental Petition for Certiorari (not a Motion to Dismiss)
within ten (10) days from receipt of a copy of the original, first and second Petitions for Certiorari.17

Pursuant to Rule 46, the Court of Appeals validly acquired jurisdiction over the persons of Ignacio and Ignacio Law
Offices and Smartnet upon being served with the above Resolution.

But neither of the parties bothered to file the required comment. Their allegation that they have been deprived of due
process is definitely without merit. We have consistently held that when a party was afforded an opportunity to
participate in the proceedings but failed to do so, he cannot complain of deprivation of due process for by such
failure, he is deemed to have waived or forfeited his right to be heard without violating the constitutional
guarantee.18

On the question of whether the Court of Appeals could amend its Resolution directing the issuance of a writ of
preliminary injunction so as to include petitioners, suffice to state that having acquired jurisdiction over their persons,
the appellate court could do so pursuant to Section 5 (g), Rule 135 of the Revised Rules of Court, thus:

SEC. 5. Inherent powers of courts. – Every court shall have power:

xxx

(g) To amend and control its process and orders so as to make them conformable to law and justice.

In Villanueva v. CFI of Oriental Mindoro19 and Eternal Gardens Memorial Parks Corp. v. Intermediate Appellate
Court,20 we held that under this Rule, a court has inherent power to amend its judgment so as to make it
conformable to the law applicable, provided that said judgment has not yet acquired finality, as in these cases.

C. G.R. No. 176650

The fundamental issue is who owns the disputed shares of stock in Northern Islands.

We remind petitioner Lincoln Continental that what it filed with this Court is a petition for review on certiorari under
Rule 45 of the 1997 Rules of Civil Procedure, as amended. It is a rule in this jurisdiction that in petitions for review
under Rule 45, only questions or errors of law may be raised.21 There is a question of law when the doubt or
controversy concerns the correct application of law or jurisprudence to a certain set of facts, or when the issue does
not call for an examination of the probative value of the evidence presented. There is a question of fact when the
doubt arises as to the truth or falsehood of facts or when there is a need to calibrate the whole evidence considering
mainly the credibility of the witnesses, the existence and relevancy of specific surrounding circumstances, as well as
their relation to each other and to the whole, and the probability of the situation.22 Obviously, the issue raised by the

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instant petition for review on certiorari, involves a factual matter, hence, is outside the domain of this Court.
However, in the interest of justice and in order to settle this controversy once and for all, a ruling from this Court is
imperative.

One thing is clear. It was established before the trial court, affirmed by the Court of Appeals, that Lincoln
Continental held the disputed shares of stock of Northern Islands merely in trust for the Guy sisters. In fact,
the evidence proffered by Lincoln Continental itself supports this conclusion. It bears emphasis that this factual
finding by the trial court was affirmed by the Court of Appeals, being supported by evidence, and is, therefore, final
and conclusive upon this Court.

Article 1440 of the Civil Code provides that:

ART. 1440. A person who establishes a trust is called the trustor; one in whom confidence is reposed as regards
property for the benefit of another person is known as the trustee; and the person for whose benefit the trust has
been created is referred to as the beneficiary.

In the early case of Gayondato v. Treasurer of the Philippine Islands,23 this Court defines trust, in its technical
sense, as "a right of property, real or personal, held by one party for the benefit of another." Differently stated, a trust
is "a fiduciary relationship with respect to property, subjecting the person holding the same to the obligation of
dealing with the property for the benefit of another person."24

Both Lincoln Continental and Gilbert claim that the latter holds legal title to the shares in question. But record
shows that there is no evidence to support their claim. Rather, the evidence on record clearly indicates that the
stock certificates representing the contested shares are in respondents’ possession. Significantly, there is no proof
to support his allegation that the transfer of the shares of stock to respondent sisters is fraudulent. As aptly held by
the Court of Appeals, fraud is never presumed but must be established by clear and convincing evidence.25 Gilbert
failed to discharge this burden. We, agree with the Court of Appeals that respondent sisters own the shares of
stocks, Gilbert being their mere trustee. Verily, we find no reversible error in the challenged Decision of the Court of
Appeals (Special Second Division) in CA-G.R. CV No. 85937.

WHEREFORE, we DISMISS the petitions in G.R. Nos. 165849, 170185, 170186 and 176650; and DENY the
petitions in G.R. Nos. 171066 and 176650. The Resolutions of the Court of Appeals (Eighth Division), dated October
28, 2004 and November 4, 2004, as well as the Decision dated October 10, 2005 of the Court of Appeals (Seventh
Division) in CA-G.R. SP No. 87104 are AFFIRMED. We likewise AFFIRM IN TOTO the Decision of the Court of
Appeals (Special Second Division), dated November 27, 2006 in CA-G.R. CV No. 85937. Costs against petitioners.

SO ORDERED.

ANGELINA SANDOVAL GUTIERREZ

Associate Justice

WE CONCUR:

REYNATO S. PUNO
Chief Justice
Chairperson

CONSUELO YNARES-SANTIAGO* RENATO C. CORONA

Associate Justice Associate Justice

ADOLFO S. AZCUNA
Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above
Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court’s
Division.

REYNATO S. PUNO

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Chief Justice

Footnotes
*
Designated to sit as additional Member of the First Division under Special Order No. 474 dated October 19,
2007 issued pursuant to Administrative Circular No. 84-2007.

1 Due to the inhibition of the presiding judge of Branch 24.

2 Due to the retirement of the presiding judge of Branch 46.

3 Vol. III, Rollo, G.R. No. 165849, pp. 1381-1399.

4 Vol. IV, Rollo, G.R. No. 165489, p. 1901.

5 Id., p. 1902.

6 Equitable Philippine Commercial International Bank and Buenaventura v. Court of Appeals, G.R. No.
143556, March 16, 2004, 425 SCRA 544, 550, citing Tantay, Sr. v. Court of Appeals, 357 SCRA 329 (2001).
7 Guaranteed Hotels, Inc. v. Baltao, G.R. No. 164338, January 17, 2005, 448 SCRA 738, 744.

8 Rudecon Management Corporation v. Singson, G.R. No. 150798, March 31, 2005, 454 SCRA 612, 632,
citing Yupangco Cotton Mills, Inc. v. Court of Appeals, 383 SCRA 451 (2002).
9 Lugayan v. Spouses Tizon, G.R. No. 147958, March 31, 2005, 454 SCRA 488, citing Development Bank of
the Philippines v. Pingol Land Transport System Co., Inc., 420 SCRA 652 (2004).
10 Arquiza v. Court of Appeals, G.R. No. 160479, June 8, 2005, 459 SCRA 753, 764, citing Panganiban v.
Pilipinas Shell Petroleum Corp., 395 SCRA 624 (2003).
11 Rualo v. Pitargue, G.R. No. 140284, January 21, 2005, 449 SCRA 121, 137, citing Searth Commodities
Corp. v. Court of Appeals, 207 SCRA 662 (1992).

12 Dela Cruz v. Court of Appeals, G.R. No. 139442. December 6, 2006, 510 SCRA 102, 114, citing People v.
Mariano, 71 SCRA 600 (1976).
13 The Judiciary Reorganization Act of 1980.

14 Feria and Noche, II Civil Procedure Annotated (2001 Ed.) 216-217. See also Herrera, VII Remedial Law
(1997 Ed.) 542.
15 Regalado, I Remedial Law Compendium (1997 Ed.) 553.

16 Vol. II, Rollo, G.R. No. 170185, pp. 1212-1213.

17 Id., p. 1211.

18 Bautista v. Court of Appeals, G.R. No. 157219, May 28, 2004, 430 SCRA 353, 357, citing Tiomico v. Court
of Appeals, 304 SCRA 216 (1999).

19 G.R. No. 45798, December 15, 1982, 119 SCRA 288.

20 G.R. No. 73794, September 19, 1988, 165 SCRA 439.

21 Torrecampo v. Alindogan, Sr., G.R. No. 156405, February 28, 2007, 517 SCRA 84, 88.

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22 Mendoza v. Salinas, G.R. No. 152827, February 6, 2007, 514 SCRA 414, 419, citing Bukidnon Doctors’
Hospital, Inc. v. Metropolitan Bank & Trust Co., 463 SCRA 222.
23 49 Phil. 244 (1926).

24 Development Bank of the Philippines v. Commission on Audit, G.R. No. 144516, February 11, 2004, 422
SCRA 459, 472, citing Tala Realty Services Corp. v. Banco Filipino Savings and Mortgage Bank, 392 SCRA
506 (2002), Huang v. Court of Appeals, 236 SCRA 420 (1994), A. Tolentino, IV Commentaries and
Jurisprudence on the Civil Code of the Philippines (1991) 669.

25 Autencio v. Mañara, G.R. No. 152752, January 19, 2005, 449 SCRA 46, 53, citing Cathay Pacific Airways,
Ltd. v. Sps. Vasquez, 399 SCRA (2003), Maestrado v. Court of Appeals, 384 Phil. 418, 327 SCRA 678 (2000),
Loyola v. Court of Appeals, 383 Phil. 171, 326 SCRA 285 (2000).

The Lawphil Project - Arellano Law Foundation

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